The Goods and Services Tax regime is making life miserable for the transport and logistics sector, with country-wide cargo movement down to at least half the pre-GST volume and truckers idling at checkposts. The government’s decision to defer the roll out of the national e-way bill requirement and allow states to develop a mechanism till the GST network is ready for this, has created problems for all stakeholders in the sector. Remember, a large amount of trade in this sector traditionally happened with little accountability and major tax avoidance. Now, consigners as well as consignees are stumped with the GST regime, which requires robust tax compliance at all levels. It could take at least a couple of quarters to bring the situation back to normal.

This piece says movement of goods in and from Nagpur has come to a virtual standstill under GST. It goes on to quote the President of the Nagpur Truckers’ Unity as saying that “As businesses come to a halt, it has hampered the entire chain dependent on transport. Drivers have been stranded at the centres where they had last unloaded the goods. Unless there is fresh load, they cannot take off. Workers engaged at the terminals are out of jobs. Even the business of highway food joints is down.”

And this one quotes a toll plaza operator at the Delhi Noida Direct Flyway (DND) to says that the number of trucks entering Delhi has dropped about 40 percent, from 8–9 lakh a day to 5–6 lakh. Uncertain how GST works, many truckers have stopped ferrying goods for the time being.

There are some historical and some obvious reasons for this state of affairs. As S P Singh, Senior Fellow and Coordinator of the Indian Foundation of Transport Research and Training (IFTRT) , explained, there are about 25 lakh transport intermediaries — people who ferry goods from one part of the country to another either directly or through freight forwarders — but only 10 percent of these have registered under the ‘Carriage by Road Act’ which was a mandatory step till the GST regime came into place. As a majority of the stakeholders remain unregistered, they are unable to operate under the GST regime, scared of getting caught.

Besides, the government’s unpreparedness and consequent deferment of the ‘E-Way Bill’ facility has hampered the logistics sector further. “With states dismantling border checkposts, the absence of mandatory E-waybill system on GSTN portal for random checking of EBN under GST rules for consignments above Rs 50,000 will encourage corruption by enforcement agencies and transporters on highways on behalf of unscrupulous goods suppliers,” Singh said.

Brokerage Edelweiss has said in a note to clients that the GST Council decided to defer e-way bill requirements at all-India level and left it to the discretion of states. The GSTN network is also not ready and will take “4–5 months” to implement the e-way bill provisions. “Hence, we anticipate few quarters of delay in implementation of the e-way bill rules on pan-India basis. Once implemented across India, e-way bills will prove to be a game changer for the economy.”

The draft e-way bill provisions mandate that:

1) Movement of goods worth more than Rs 50,000 by a registered entity will require prior online registration of the consignment on the GST portal and securing an “e-way” bill.

2) In case the e-way bill is not generated by the registered entity and the goods are still handed over to a transporter, the registered entity shall furnish the information relating to transporter on the common portal and the e-way bill shall be generated by the transporter.

3) The registered entity will also be required to furnish the information and generate the e-way bill for all inward supplies from an unregistered player.

4) The entity carrying the goods will be required to carry the e-way bill along with invoice/bill of supply/delivery challan. The facility of generation and cancellation of e-way bill may also be made available through SMS.

Naveen Gupta, General Secretary of the All India Motor Transport Corporation (AIMTC) said cargo movement across the country was down at least by 50 percent since neither traders nor transporters understand how to move forward. He said, “How to deal with cargo sent by unregistered consigners, what to do in the absence of the e-way bill provision where every state continues to issue a transit pass and how to handle the steep demand decline across sectors post-GST? These are some of the issues which are affecting the transport sector at present”. Gupta said once the e-way bill facility is implemented, things could move back to normal.

Analysts at ratings agency Fitch said in a note to clients that GST should offer significant opportunities for productivity. “For example, it will become much quicker and less costly to move goods across the country now that trucks will not be held up at checkpoints at state borders. Smoother logistics should reduce retailers’ need for working capital and allow them to operate centralised warehouses, rather than in every state. Supply chains could extend, encouraging specialisation, now that there is less incentive to source goods within state borders. Tax filing may also become less time-consuming as a result of the new electronic system.”

In an interview this morning, Road Transport and Shipping Minister Nitin Gadkari said logistics costs should fall by 20 percent under GST. He said, “Companies could do this with a hub-based warehouse system instead of having warehouses in all major consumer states. The checkposts at state borders have already been brought down. Karnataka, Andhra Pradesh and Tamil Nadu, along with 20 more states, have dismantled border checkposts, reducing hassles for trucks. Several others are in the process (of doing so). The border checkposts have been removed even as states await electronic way bills, which will make truck movement easier. The e-way bill on GSTN (Goods and Services Tax Network) is expected to be introduced soon and will aid movement of trucks.“

Removing checkposts is a good step but now, truckers complain of frequent checks from ‘flying squads’ across states, more frequent than in the past, which hold up cargo movement for days. Besides, as explained earlier, not only the fear of increased tax compliance affecting cargo movement severely, volume of goods being shipped across sectors has anyway dropped significantly as manufacturers and traders get acclimatised with the GST compliance requirements. IFTRT’s Singh said the APMC was receiving 500 trucks of agri supplies daily but this is down to 300 now as monsoon related price increase has affected trade in agri commodities. Gupta of AIMTC said wholesale markets like the one in Delhi have been shut for the last two-three days as traders are not ready to comply with the new rules.

While all these bumps will probably smoothen out at some point, for now the logistics industry stakeholders continue to grapple with serious compliance issues under the GST regime as of now.